Treasuries remained in full retreat Monday, as bears were not dissuaded after the long holiday weekend. The yield on the 5-year (the underperformer for the day) rose 9 basis points and is up 43 basis points since the FOMC meeting. Surging stocks added to the more defensive tone in bonds as Wall Street looks toward improved economic growth prospects over the second half of the year.
The Nasdaq climbed over 54 points (3.47%) and pierced the 1700 level for the first time in over a year. Supply also added to the rise in yields as the Treasury announced an $11 billion 10-year TIPS offering for Wednesday, and a few more corporates entered the issue market ($750 mon 5-year from Toyota Motor Corp. and a $1.2 billion multi-tranche deal from Calpine).
Yield-curve steepeners kept the long bond heavy, though the curve play looks to have run its course with the 2-year note and 30-year bond gap holding just shy of +340 basis points. There was no data on the schedule, and data is light until Thursday when PPI and trade figures will be released. Traders anticipate an increase in June producer prices, which should discourage any lingering market concerns of deflation. Note the House Financial Services Committee scheduled Greenspan's monetary policy report for July 15.